Mon 16 May, 2016 10:50 am
Hey guys I've got this question for HW. Does anyone know how to draw a diagram for this? At the moment all I'm seeing is an increase income which will shift the income curve to the right and onto a new Indifference curve.
Question: Assume all your income is spent on two goods: mortgage (in which the price of mortgage is the interest rate) and a composite good (in which its price is $1). With the help of a diagram, explain how a negative interest rate affects your optimal basket of these two goods.